The cheque must have been presented to the bank within the validated time i. In order to duly protect the interest of its payee, holder in due course, there is an attempt to discourage dishonour of a cheque. Definition the negotiable instruments act, 1881 makes the dishonour of cheques a criminal offence. A dishonour, whether based on a second or any successive presentation of a cheque for encashment, would be a dishonour within the meaning of section 8, msr leathers v.
Dishonour of cheques refers to the practice of issuing cheques without the intention of honouring them. Currently this site is free but will require registration. Any demand made after the dishonour of cheque will constitute a notice. The rbi has suggested some cheque writing guidelines and even impact of cheque dishonour with effect from 1st july 2010 with reference to the following circular. The offence is when the drawer receives a notice from the payee and he fails to pay the dishonoured cheque amount within the grace period of 15 days that constitute an offence. A cheque contains a mandate of the drawer to pay some specific amount of money to the bearer or the person whose name is mentioned therein. In the case of the dishonouring of a cheque under certain circumstances, section 8 dishonour of cheque for insufficiency of funds in the accounts etc. Section 8 makes dishonour of cheque in certain cases an offence. Reason for cheque bounce with receipt of return memo sent by the bank.
Liability of directors in case of dishonoured cheque law corner. The act makes it an offence for any person anywhere in nigeria to induce the delivery of any property or to purport to settle a lawful obligation by means of a cheque which when presented within a reasonable time 15 is dishonoured on the grounds that no funds or insufficient funds were standing to the credit of the drawer of the cheque 16. Defense which may not be allowed in any prosecution under section 8. Mar 15, 2018 the payment by the accused of the full cheque amount during the pendency of trial under sec 8 does not absolve the accused of his liability for the offence of dishonour of cheque. Before 1988 there being no effective legal provision to restrain people from issuing cheques without having sufficient funds in their account or any stringent provision ot punish them in the vent of such cheque not being honoured by their bankers and returned unpaid. Beena shabeer 2002 3 klt 218 sc the apex court held that a cheque given as security for the liability of the accused or for the liability of any person would also fall under the mischief of offence punishable. Registered users can write a blogarticlepost up to 2,000 characters. Nevertheless, cheques still play an important role as a method of payment in sri lanka. If the court of law has given an order to the bank to stop payment on the cheque. The complainant should have deposited the cheque drawn in hisits favour, which cheque s has been returned unpaid or has been dishonoured due to. Dishonestly issuing a cheque is governed by section 489f of the pakistan penal code, 1860. This increases liability and widens the scope of the natural principle of law in the corporate field. It is attempted in this article to briefly highlight the sri lankan law governing cheques especially in relation to the aspects of origin and characteristics of cheques, payment by cheques, presentation of cheques for payment, and dishonour of cheques. Both the drawer and payee may be natural persons or legal entites.
More elaborately, a cheque is an unconditional order in writing addressed by an account holder an owner and user of an account, also known as the drawer to a bank the bank that created, manages and administers the account and issued the cheque booklet also known as the drawee signed by the drawer, requiring the banker the drawee to pay on demand a sum certain in money or to the order. While criminalising of dishonour of cheques took place in the year 1988 taking into account the magnitude of economic transactions today, decriminalisation of dishonours of cheque of a small amount may also be considered, leaving it to be dealt with under civil jurisdiction. Dishonour of blank cheque a judicial perspective by. This is also the position as regards the presentation of the cheque, dishonour of which is then pleaded as the territorial platform of the complaint under section 8 of the ni act. Jun 16, 2019 your free access to live law has expired.
Dishonor of cheque and allied provisions under the. A cheque is said to be dishonoured when the payment is not made on its presentment to the bank. The draft thus prepared for the fourth time was introduced in the council and was passed into law in 1881 being the negotiable instruments act, 1881 act. Cheques are order instruments, and are not in general payable simply to the bearer but must be paid to the payee.
This blog talks about the the 12 reasons for dishonour of cheque and also. Issuing of a cheque and its dishonour is not an offence. A dishonoured cheque is one, which when presented is refused payment by the bank because of insufficient funds or because it is not in order, dishonestly issuing a cheque is a criminal offence in pakistan. Liability of companies for dishonour of cheques law teacher. Liability of directors in case of dishonoured cheque law. If payee decides to proceed legally, then the drawer should be given a chance of repaying the cheque amount immediately. Whenever a cheque is drawn by a person in favor of another person and that cheque is returned by the bank unpaid due to insufficiency of funds in the bank account of the drawer, the cheque is said to be dishonored. Date on which cheque was presented for payment and that the cheque was presented before its expiry period. The act stipulates a penalty of two years imprisonment for convicted.
Jurisdiction for trial for dishonour of cheque mystery of. An instrument is dishonoured when a necessary or optional presentment is duly made and due acceptance or payment is refused, or cannot be obtained within the prescribed time, or in case of bank collections, the instrument is reasonably returned by the midnight deadline. Pdf cheque dishonour is dealt under section 8 of the negotiable. That the debtliability, for which the cheque was issued by the accused to the complainant is a legally enforceable debtliability. Jul 03, 2020 the law considering the bouncing of cheque provides adequate justice for the wrong ones. Nov 04, 2019 the offence of cheque dishonour can be completed with the focus of some specifics which are as follows a drawing of the cheque, b presentation of the cheque, c returning of the cheque unpaid by the drawee bank, d giving notice in writing to the drawer of the cheque demanding payment of the cheque amount, e failure of the drawer to make. Sample letter for notice of dishonoured check cheque. Section 8 of negotiable instruments act legal helpline. The author, vasu manchanda, is 2nd year, llb student at law. Meaning and types of cheques blacks law dictionary defines cheque as a draft upon a bank and payable on demand authorized by the maker or 1 2007 3 scc 626. An act relating to bills of exchange, cheques and promissory notes. A cheque bounce notice is essentially a legal notice and must be sent within the limitation period of 30 days from the date of the cheque s being bounceddishonoured.
Jul 30, 2020 the negotiable instruments act, 1881 is an act to define the law relating to promissory notes, bills of exchange and cheques. After the receipt of dishonoured cheque with return memo from bank, demand notice to be sent by registered post with ad within 30 days from the date of receipt of return memo and dishonoured cheque from bank. Before 1988, no liability was incurred in case of dishonour of cheque, but the insertion of section 8 in the negotiable instruments act, 1881 hereinafter referred to as the act imposed collective liability of a criminal as well a civil nature, by way of shortterm imprisonment and. In the case of dishonour of cheques, sending of legal notice is necessary before filing of case in the court.
Mithelesh ba0038 introduction a cheque as a negotiable instrument has been clearly defined under section 6 of the negotiable instrument act. A stepbystep guide for legal recourse the dishonour of cheque is a criminal offence and is punishable by imprisonment up to two years or with monetary penalty or with both. The negotiable instruments act, 1881 is an act to define the law relating to promissory notes, bills of exchange and cheques. An act to codify the law relating to bills of exchange, cheques, and promissory notes. Beena shabeer 2002 3 klt 218 sc the apex court held that a cheque given as.
Advent of cheques have give a new dimensions to the commercial world since business. Dishonour of cheque in india legal service india law. Dishonour of cheque latest law passed by national assembly. Civil nature of the dispute also could not estop the complainant to invoke the criminal law section 489f. Section8 of the ni act clearly states that for the dishonored cheques the drawer shall be liable for conviction if the demand is not met within 15 days of the receipt of the notice but this is without prejudice to any other provision of the act. Provided that due notice of dishonour of the bill or cheque has been given. Over the period of time, various developments pertaining to issuance, bouncing and dealing of blank cheques have taken place by the honble courts of india. Legal remedies for dishonour of cheque law times journal. Pdf some aspects of the law relating to cheques chamila. The law relating to dishonour of cheques deals with the meaning of dishonour as well as the remedy in such cases against the defaulters. This video is about the law in pakistan regarding cheque dishonour and remedy available in pakistan. Harman, in fact, duly heeds the absurd and stressful situation, fast becoming. Protection to banker and drawer where cheque is crossed.
The earlier views held by the various indian courts regarding dishonour of a blank cheque are as follows. Where any cheque drawn by a person on an account maintained by him with a. As per 2th report of law commission of india, over 38 lakh cases of dishonour of cheque were pending in courts and out of them over 7. According to section 6 of the negotiable instruments act, a cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and cheque in the electronic form. Section 8 of nia provides that the dishonour of the cheques for the reasons. Matters relating to cheque bounce including cheque bounce notice, are dealt with under section 8 of the negotiable instruments act, since a cheque is a negotiable instrument. Issuance of stop payment instructions by the drawer to the drawer bank. Banks should also lay down requisite internal guidelines for their officers and staff and advise them to adhere to such guidelines and ensure strict compliance thereof to achieve. Dishonour of cheque section 8 of the negotiable instruments act. Downlaod free ebook banking awareness book for beginner. Dishonour of cheque indian judgements dishonour of cheque. Act, 1881 as amended uptodate issued by the complainant and the said notice was despatched by regd.
It states that the payee or holder in due course of the cheque as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque. Negotiable instruments question 8 when a bank must or may dishonour a cheque. Insufficiency of fund in the account of the drawer. Law applicable to such offense and punishment prescribed under the law. This is a form of notice under section 8 of negotiable instrument act, 1881 for dishonour of cheque under certain grounds. The entire law fraternity is keen to hear from lawyers, solicitors, judges and legal professionals from respective bar associations, state and territory to share ideas, give opinions and light on important matters. Negotiable instrument act 1881 pakistan pdf free download. Aug 09, 2014 parties, leave aside the place where the dishonour of the cheque has taken place. For dishonour of one cheque there can be only one offence and such offence is committed by the drawer immediately on his failure to make the payment within 15 days of the receipt of the notice served. There are many stipulations to be followed as stated in section 8 of the negotioable instruments act. Answer introduction dishonour of negotiable instruments. Dishonor of cheque and allied provisions under the negotiable. Cheque bounce notice format format download free legal. Section 6 of the negotiable instruments act, 1881 defines a cheque as under.
Air 2007 doc 264 delhi is an illustration of such cases. Dec 11, 2008 dishonour of a cheque on the ground that the account has been closed by the drawer of the cheque does not constitute an offence under section 8 as the said section, contemplates dishonour of a cheque either for want of funds or for exceeding the arrangements made. Dishonouring of a bank cheque punjab judicial academy. Negotiable instruments act, 1881 legislative department. Dishonour of cheque is a criminal offence in india and is punishable by law with imprisonment up to two years or with the monetary penalty or with both. This article is brought to you for free and open access by the. In the negotiable instruments act, 1881 xxvi of 1881, after section 1c the following new sections shall be inserted, namely. Jul 07, 2016 the amendment makes changes in provisions relating to the territorial jurisdiction for filing cheque dishonour cases in the negotiable instrument act. The format can be also downloaded for free in pdf version from the link provided after the format. If imprisonment is pronounced to the drawer, it may extend to two years. Of course on dishonour of cheques there is a civil liability accrued.
On each presentation of the cheque and its dishonour, a fresh right and not cause of action accrues. There will be occasions when you will submit a check froma customer to your bank in good faith, only to have it dishonoured declined. Sample letter for notice of dishonoured check cheque it is an offence to present a check cheque for payment when there are insufficent funds in the bank account to cover the amount to be paid. The negotiable instruments act, 1881 is applicable for the cases of dishonour of cheque.
That i filed this complaint in writing, in due course of the cheque, before this honble court for taking the cognizance of the offence committed by the accused which is punishable under section 8 of the act. The supreme court also observed that, the nature of offence under section 8 primarily relates to a civil wrong. Effect of amendment act of 2015 as per the amendment the offence under section 8 shall be inquired into and tried only by a court within whose local jurisdiction. Penalties in case of dishonour of certain cheques for insufficiency of funds in the accounts.
Dishonor of cheque practice areas insolvency and bankruptcynclat and ncltcompany and commercial law bail lawyer banking lawscontract lawdishonor of cheque intellectual property laws introduction section 8 of the negotiable instrument act, 1881 confers accountability on a person who issues a cheque towards discharge of a debt or liability as a. Nov, 2017 section 8b of the negotiable instruments act, 1881 provides for the notice of dishonour. The drawer of a bill of exchange or cheque is bound, in case of dishonour by the drawee or acceptor thereof, to compensate the holder. This act may be called the negotiable instruments act, 1881. On the recommendation of the new law commission, the bill was redrafted and again it was sent to a select committee which adopted most of the additions recommended by the new law commission.
Instrument act, 1881 states penalties in case of dishonour of certain cheques. In demand notice, 15 days time to be given to the accused for making payment from the date of receipt of notice by the accused. Dishonour of cheque is a criminal offence which is punished with fine or imprisonment or both. Legal remedies of dishonour of cheque the law express. According to section 8 of the act, the dishonour of cheque is a criminal offence and is punishable by imprisonment up to. This concept can be defined in simple terms as follow. Format notice of cheque dishonour this is a form of notice under section 8 of negotiable instrument act, 1881 for dishonour of cheque under certain grounds. However, the courts take a lenient view in such cases and the accused is set free or punished lightly. But the notice which is mandatory must contain certain ingredients. Dishonour of cheque judgments, shub teleelectro pvt ltd. In order to duly protect the interest of its payee, holder in due course, there is an attempt to discourage dishonour of a cheque by making it an offence. A notice must be served to the drawer the notice must be served in writing within 30 days of the receipt of information from the bank that a particular cheque has been returned unpaid. The law considering the bouncing of cheque provides adequate justice for the wrong ones. A crossed cheque is a cheque that has been marked specifying an instruction on the way it is to.
The fact of such dishonour of the cheque had been communicated to the accused person by a notice us. The directors of a company can also held liable for the dishonour of cheque or and cheque bouncing. The monetary penalty for dishonour of cheque may be twice the amount of the cheque. Rbi guideline on cheque writing impact on cheque dishonour. Particularly, section 11a and b of the rather concise act provide that. May 07, 2019 the holder or payee of the cheque may present the cheque for encashment on any number of occasions within the period of its validity three months from the date of issue. In case of nonpayment within 15 days, cause of action arises on 6th day from the date of receipt of notice by the. A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on.
Pdf a conspectus of the law on dud cheques frederick. According to section 8 of the act, the dishonour of cheque is a criminal offence and is punishable by imprisonment up to two years or with monetary penalty or with both. Dishonour of cheques and wrongful dishonour by banks. Legal notice formdishonour of cheque8 sense of law. Dishonor of cheques law times journal free legal news. A cheque issued by a drawer and accepted by the drawee serves two purposes. Section 8 in the negotiable instruments act, 1881 indian kanoon. The dishonour of cheque is a criminal offence and is punishable by imprisonment up to two years or with monetary penalty or with both. Section 8142 of partvii of the negotiable instruments act, 1881 deals with the concept of dishonor of cheques. This site contains digest and judgments of supreme court and all high courts of india regarding regarding dishonour of cheque from 1989 onwards. Dishonour of cheque judgments, criminal law soolegal. Section 8 of negotiable instrument act deals with cheque bounce punishment.
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